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Sarawak: ATimes - Malaysia's Bakun project: Build and be damned
By Tony Allison
8/9/2001 5:19 am Sat
28 Oct 2000
Malaysia's Bakun project: Build and be damned
by Tony Allison
Despite a long history of controversy and difficulties, both financial and political,
Malaysia is proceeding with the Bakun Hydroelectric Project (HEP) in Eastern
Sarawak, although most likely on a smaller scale than originally planned.
The project, originally estimated at US$5.2 billion, was to construct what would have
been the world's second-largest dam. Work was suspended at the height of the Asian
economic crisis in 1997.
Unofficial estimates say that if the project is revived in full, it would cost a third more
than its original price tag. Funding would have to come from state coffers as the
government has assumed control of what was once a private turnkey project.
Bakun Dam was to supply 2,400 megawatts (MW) of electricity - generated from a
reservoir the size of Singapore - to East Malaysia and the peninsula via undersea
cables, although the latter proposal is most likely to be scrapped.
Prime Minister Mahathir Mohamad said on October 23 the project would be revived as
money spent on pre-construction works should not be wasted. "We will revive it,
whether full-scale or not we have not decided yet,'' he said. He added the dam was
needed to meet the growing demand for electricity in Malaysia. However, most of the
growth in demand for electricity is not in Sabah and Sarawak in East Malaysia where
the dam is located, but in the peninsular.
Environmentalists and social activists have roundly and vigorously opposed the
project, saying it will destroy a vast tract of rain forest and force more than 10,000
villagers from their homes. Many thousands have already been resettled.
The Bakun HEP was taken over by the government in 1997 and subsequently
suspended by then Deputy Prime Minister and Finance Minister Anwar Ibrahim, much
to the ire of Mahathir. Differences over the project are believed to have contributed to
the later sacking of Anwar. Earlier, the leaders of an international consortium
managing the project, ABB, had been dumped from the project in acrimonious
Last June Mahathir said Malaysia must proceed with construction because of rising
industrial demand for electricity, and work on diversion tunnels for the river was
resumed. The project is now managed by the national utility company, Tenaga Nasional
Work on the 12-meter high, 1.4-kilometer long tunnels, being undertaken by South
Korea's Dong Ah Construction Ind Co Ltd, is expected to be completed in early 2001.
On the current schedule the dam will be able to generate 500 MW of electricity by
In its original form the HEP comprised the construction of a 2,400 MW hydroelectric
dam, the transmission of its electricity, and the building of related infrastructure
including access roads, a new township and an airport. The dam would bridge the Balui
river, about 37 km upstream of Belaga in Sarawak. Sarawak is one of the two East
Malaysian States in the northern part of the island of Borneo. The transmission of its
electricity would have necessitated some 1,500 km of overland wires and four
650-km-long undersea cables under the South China Sea to Peninsula Malaysia.
The dam is to be a 205-meter-high Concrete Face Rockfill Dam (CFRD), with a
length of crest of 740 meters, a base width of 560 meters and a crest width of 12
meters. This makes it one of the highest rockfill dams in the world. It will flood 69,640
hectares of land, an area bigger than Singapore. Its catchment area is over 1.5 million
hectares of mainly primary forest, even though some 16 percent of Sarawak's total log
production currently comes out of this area. Fifty-one percent of the land of the
reservoir area is Native Customary Land (meaning it is legally owned by indigenous
The project requires the relocation of up to 10,000 indigenous people, mainly of the
Kayan, Kenyah, Kajang, Ukit and Penan ethnic groups. In addition, by changing water
quality and river flow patterns, it would potentially affect the thousands of people living
downstream of the dam, on the Rajang river, which is the longest river in Malaysia.
The completion date was to have been 2003.
Malaysia's power needs
Malaysia's energy policy has traditionally been based on a four-fuel strategy - gas,
oil, hydroelectric and coal. Of these, gas is dominant, with about 70 percent of the
country's requirements supplied by gas-fired power plants.
However, the government will adopt a "five-fuel" policy in the Eighth Malaysia Plan
(2001-2005) by placing stress on "renewable energy" as an alternative source. The
move is prompted by too much reliance on gas and the pollution caused by other
options. Promising areas for renewable energy include the conversion of biomass
waste to energy, and in solar-power applications. Given this initiative, the opponents
of Bakun will further question the need for it.
A country typically experiences growth in electricity demand at approximately 1.5
times the rate of its economic growth. Malaysia is currently in the second year of a
strong recovery from the effects of the Asian financial crisis of 1997-98. Following a
7.5 percent decline in real gross domestic product in 1998, Malaysia experienced real
GDP growth of 5.4 percent in 1999. Real GDP growth for 2000 is projected at 5.8
percent. Oil and gas production accounts for more than 8 percent of Malaysia's total
Malaysia currently has approximately 14,000 MW of electric generation capacity. In
1998, the country generated about 57.4 billion kilowatthours of electricity. In addition,
four power projects are scheduled to be commissioned after 2000: Yan Power Plant
(1,200 MW), Lumut Power Plant (2,100 MW), Perlis Power Plant (650 MW), and
Kulim Power Plant (450 MW).
Bakun had been slated to send 70 percent of its generated power (officially stated as
an average output of 1,770 MW) from Sarawak to Kuala Lumpur through the
construction of 664 km of overhead lines in eastern Malaysia, 640 km of submarine
cables and 456 km of distribution infrastructure in Peninsular Malaysia. In addition,
expansion plans included a high-voltage line south to Johor Baharu and north to Perlis,
near the western Thai border.
The development of the Bakun HEP was aimed to create a more balanced generation
mix, with hydro sources accounting for 19.7 percent by the year 2005. The project is
touted as one of the most hydrologically efficient base-load plants in the world, with a
ratio of firm energy to average energy of 92.5 percent.
Malaysia is reforming its power sector to make it more competitive and to lower costs.
Currently, three state-owned utilities dominate power generation and distribution. The
market was opened to independent power producers (IPPs) in 1994, and 15 IPPs were
licensed. Tenaga Nasional Berhad, the manager of the HEP, began in 1999 to divest
some of its generation units.
The Bakun HEP has been mired in controversy since it was first proposed in the early
1980s. Apart from the question of its necessity, its financial viability and its
environmental costs, questions have been raised from the beginning about its
potentially disastrous social impacts as it would flood an area the size of Singapore
and some 15 indigenous communities involving more than 1,500 families and nearly
10,000 people would have to be resettled.
The project is opposed by many in the indigenous communities of Malaysia, together with the opposition Democratic Action Party (DAP) political party, the Coalition of Concerned NGOs on Bakun (Gabungan) - a coalition of over 40 Malaysian NGOs, including the World Wildlife Fund For Nature (WWF) Malaysia and the Environmental Protection Society of Malaysia (EPSM) - and many other NGOs and individuals around the world. Some of the key criticisms include:
Malaysian Prime Minister Mahathir Mohamad has steadfastly defended the project,
saying it was the "government's way of helping the poor". He has also attacked critics
of the project as unpatriotic and irresponsible, and has blamed "foreign" hands for
EIA reports: The project promoter was required under the Environmental Quality Act
1974 and the Natural Resources and Environment (Amendment) Ordinance, 1993 of
Sarawak, to submit EIA reports, detailing the possible impacts and the mitigating
measures. The Natural Resources and Environment Board (NREB), Sarawak and the
Department of Environment, Ministry of Science, Technology and Environment were
the responsible authorities for approving the EIA reports and in ensuring that the
project promoter complied with any mitigation measures as stipulated in the EIA
The publication of the EIA did little to reassure critics. Not only did it specifically
exclude assessment of the impact on the communities, but the assessment of the
project generally was full of omissions, mistakes and questionable assumptions. In
issuing the EIA report, the government ensured that it could be inspected only in
Kuching, the state capital of Sarawak, and two small towns in the vicinity of the
proposed dam, shutting out those campaigning against it from having access to the
report, which was also made available in these three centers at an exorbitant cost and
only in English.
At one stage the Malaysian High Court even declared the project invalid. It ruled that
the decision to implement the project had not been reached through any form of public
participation. The government's reaction was to dismiss the decision as "technical".
The High Court found that the government had subverted the basic rights of the
indigenous peoples to comment on the EIA before approval. The issue was brought to
the court by three members of a native tribe who would have been the direct victims of
the project. The ruling was later dismissed on appeal.
History of the project
Studies relating to the hydropower potential of the Rejang River Basin, in which Bakun
is situated, began in the 1960s. The Bakun HEP, which was to be a part of a series of
dams, was subject to several dozen separate studies covering technical, economic and
environmental aspects. The government began serious discussion on the project in the
late 1980s, but decided against it in 1990, for the following reasons:
A review of the project undertaken in 1992 concluded that the project was
economically viable and should be implemented, for full commissioning by 2005. Based
on this review, the government agreed in September 1993 that the project be started.
Prime Minister Mahathir said at the time: "Bakun will not only provide the cheapest
source of energy but will also serve as a catalyst to the country's industrialization
program." This included being able to supply energy to fuel an aluminum smelter in
Bintulu. Other official reasons given at the time for its revival were:
A public-listed company, Ekran Berhad, submitted a conceptual proposal to the
government to implement the project on a privatized turnkey and fast-track basis for
commissioning by 2003. Ekran's chairman, Ting Pek Khiing, was known to be close to
Prime Minister Mahathir Mohamad and other leading politicians. Subsequently, the
government issued an invitation to Ekran Berhad to submit a detailed project proposal.
This was reviewed with the assistance of international consulting firm, Harza
Engineering LP of the United States. Subsequently, a letter of intent was issued to
Ekran Berhad to undertake preliminary works to implement the project, including the
preparation of tender documents, prequalification of contractors, invitation to bid and
submission of EIA reports.
In view of the huge capital outlay involved, the government decided the project be
undertaken by a joint-venture company. The State Government of Sarawak, Tenaga
Nasional Berhad (TNB), Sarawak Electricity Supply Corporation (Sesco), Malaysia
Mining Corporation Bhd (MMC) and others were invited to participate in the venture,
to be led by Ekran Berhad. Its responsibilities included the sub-contracting of all
necessary works related to the project, and the raising of the finance. The Sarawak
State government, however, was responsible for the resettlement of the affected
In order to meet the commissioning target of 2003, the government allowed Ekran
Berhad to proceed with the preparatory works. The government requested Ekran
Berhad to begin work on the 12-metre high, 1.4-km-long river diversion tunnels first,
since they were a critical component of the project.
For the main works, Ekran Berhad invited bids based on a tender document which was
prepared by the company and reviewed by the government. The bidders were required
to submit tenders on a lump sum design-build basis. For this bidding exercise, the
project was divided into two packages - hydro and transmission. Bidders were allowed
to submit tenders for either separate individual packages or combined packages.
On June 13, 1996 the Malaysian government announced the awarding of the tender to
an international consortium led by ABB, an international electrical engineering
company which was the result of a merger between the European engineering giants
Asea of Sweden and Brown Boveri of Switzerland. ABB was to construct the
hydro-electric power generation plant and transmission system at Bakun. With its
value of more than $5.5 billion, it was the largest single project ever handled by ABB.
As consortium leader, ABB was responsible for the overall project management and
supply of all electrical equipment, including six 420-megawatt hydro-generators and a
complete 500-kilovolt High-Voltage Direct Current (HVDC) transmission system to
connect the power plant in Sarawak to the centers of population in Peninsular
Malaysia - a total distance of more than 1,300 km, of which half will be via three
submarine cables under the South China Sea.
ABB's consortium partner for the civil works was Companhia Brasileira de Projetos e
Obras (CBPO) of Brazil, a large civil engineering company belonging to the Odebrecht
Group and which was to be responsible for the construction of the dam and power
house. In addition, substantial work was to be carried out by Malaysian companies and
other groups from Asia, Latin America and Europe. ABB agreed to follow the
Malaysian government policy of transferring and sharing technology. Engineering
consultants from Germany (Lahmeyer) and the United States (Harza) helped with
feasibility studies, dam design and overall project supervision.
By 1997 the project faced major difficulties. Financing was proving to be a problem,
with reports of lack of payments and uncertain deadlines, and Malaysian government
agencies were forced to take up large share-holdings, meaning taxpayers' money was
being used. Conditions at the dam site were said to be bad, and although never
officially confirmed, there were said to have been a number of fatal accidents. Delays
caused by problems with the diversion tunnels had already indicated the unjustified
optimism of original schedules, and the schedule for the resettlement of the indigenous
people was repeatedly delayed.
In 1997, the contract with ABB was withdrawn after an bitter row with the project
developers, Ekran Berhad, mainly over the issue of time/cost estimates and who was
to be responsible for any extra payments in the event of overruns, and on Ekran's
insistence on using subcontractors linked to it without going through the tendering
process. Subsequently, the project was suspended, due in part to the economic crisis
in Southeast Asia and to investor fears over its high financial risks.
The immediate impact of the loss of the construction contract was a write-off of $100
million in ABB's third-quarter results. In terms of market share, ABB slipped from
first to third place in the hydro generator market for the world's largest projects, behind
its rivals, General Electric and Siemens.
By December 1997, with the project stalled, then Deputy Prime Minister and Finance
Minister Anwar Ibrahim announced its indefinite suspension, along with all other major
infrastructure projects in the country. It was unusual for Anwar and not Mahathir to
make this decision. Some analysts suspect that Anwar wanted to preempt measures
that might be taken by the recently formed National Economic Action Council, formed
to tackle problems flowing from the Asian economic crisis. There was concerns that
well-connected businessmen in Malaysia would be appointed to the council and that
they would take steps to protect their interests at the expense of national interest.
Political fallout: The HEP is believed to have been one of the factors causing the
fallout between Prime Minister Mahathir and Anwar, his anointed successor. During
the country's general election in November 1999, Sarawak Chief Minister Tan Sri
Abdul Taib Mahmud accused Anwar of sabotaging Bakun and other large development
projects in Sarawak. Taib said that in front of the prime minister Anwar supported all
development projects in Sarawak, but that behind his back he criticized and cancelled
In early November 1999, Anwar testified in the High Court - where he was being
charged with s###my - that he had clashed with Mahathir when he disagreed with the
prime minister's directive to him to use treasury funds to compensate Ekran without
proper audit and procedures as it was not the duty of the finance minister to "plunder"
public funds to save any company. Anwar said the prime minister was angry with him
over the matter and this led to "bad blood" between them, culminating in his dismissal
on September 2, 1998.
In mid-1999 work resumed on the river diversion tunnels, a major component of the
project, which are due be completed by early 2001. The Malaysian government has
taken control of the project, under the management of national utility company, Tenaga
Nasional Berhad. To date, financial compensation totaling more than $250 million is
believed to have been paid to Bakun Hydroelectric Corp, Ekran and other parties. It is
estimated that 9,000 people have already been relocated, where they face high costs of
living and social problems.
In November 1999 the Tenaga Nasional Berhad and Sarawak Electricity Supply
Corporation (Sesco) were asked to review the scope and scale of the revived project.
It is believed that the subsea transmission line concept has been abandoned, and the
government is exploring the possibility of sales of electricity to Brunei and Indonesia.
It is likely the project will be scaled down from its original 2,400 MW capacity, but to
what extent is still unclear.
Critics say that both Sarawak and Sabah, where the power will have to be sold should
the undersea option be canned, already have enough electricity and they are certain to
remount their sustained campaign to have the project scrapped.
(Special to Asia Times Online)